Why ACH Went Away

As I’ve posted in the past, taking away EFT and ACH from the online gaming world is not difficult. In fact, it turns out that it’s a lot easier than even I thought it would be. Last week NACHA, which helps create rules for ACH providers and networks, published the following letter to its members.

OPERATIONS BULLETIN

INTERNET GAMBLING TRANSACTIONS

Through this Operations Bulletin, NACHA calls attention to current laws and forthcoming regulations that may affect the ACH Network.

On October 13, 2006, the President signed into law the SAFE Port Act1 which, among other things, contained the Unlawful Internet Gambling Enforcement Act of 2006 (“Internet Gambling Act”). The Internet Gambling Act specifically prohibits some, but not all, kinds of Internet gambling. In addition, it requires the Department of Treasury and the Federal Reserve, in consultation with the Department of Justice, to prescribe regulations to require that designated payment systems and their respective participants identify and block payments for illegal Internet gambling transactions. The agencies must issue these regulations within 270 days of the law’s enactment, which is on or around July 9, 2007.

Although NACHA is working with the agencies to determine how the new regulations will affect the ACH Network, NACHA understands that the Department of Justice believes that existing federal law prohibits many Internet gambling transactions and that in many cases the Internet Gambling Act merely restates the current law. For example, a court has ruled that a sports betting Internet gambling site violated the Wire Act and enjoined processing payments for that site.2 However, the full scope of any existing prohibition against Internet gambling, and the processing of payments for Internet gambling sites, under federal law is unclear and has not been fully tested in the courts.

Financial institutions should be aware that Internet gambling operations may be contrary to existing federal or state law. Knowingly originating or processing ACH entries on behalf of companies that are directly involved in, or companies that facilitate, illegal Internet gambling involves legal risk for ODFIs and merchant processors.

NACHA reminds financial institutions that (i) they should know their customers and (ii) they should not be originating for companies doing illegal business. Also, in the case of financial institutions processing entries that are received through a third-party service provider, the financial institutions should know their customer’s customer.

* * *

If you have any questions concerning this Operations Bulletin, please contact the Network Rules Department at NACHA at (703) 561-1100.

So, in essence, this was a completely voluntary move by ACH providers to choke off money going to online gaming sites. They didn’t even need to code their transactions because they knew who the violators were and they just turned them off completely.